Answer: Sarfaesi Act, 2002 gives power to Banks And Financial Institutions to take possession of mortgaged and hypothecated assets and sell the same without filing a case in a Court or Tribunal. However, under Sarfaesi Act, 2002, the Banks and Financial Institutions can not take possession of assets of the borrower and guarantors, which are not mortgaged and hypothecated.

Answer: Previously, there was some confusion as to whether Cooperative Banks can take Sarfaesi Action. Now the controversy has been settled by Supreme Court of India holding that Cooperative Banks are entitled to take action under Sarfaesi Act, 2002. It was held by a 5 Judge Bench of the Supreme Court of India in the case of Pandurang Ganpati Chaugule Versus Vishwasrao Patil Murgud Sahakari Bank Limited reported in (2020)9 Supreme Court Cases Page 215 , that the Cooperative Banks under the State Legislation and multi state Cooperative Banks are Banks under Section 2(1)( c) of the Sarfaesi Act, 2002. Thus, they are entitled to take action under Sarfaesi Act, 2002.

 

Answer: Supreme Court of  India has held in a number of cases that a writ petition cannot be filed in the High Court against the steps and measures taken by the Secured Creditor in view of the fact that there is an alternative remedy under Section 17 of the Sarfaesi Act, 2002. Some of the judgements of the Supreme Court in this connection , are mentioned below :- 

United Bank of India -versus- Satyawati Tandon reported in (2010)8 Supreme Court Cases page 110

Kanhaiyalal -versus- State of Maharastra reported in (2011)2 Supreme Court Cases page 782

Punjab National Bank -versus- Kut Energy (P) Ltd. reported in (2020)19 Supreme Court Cases page 541

Answer: In the case of Mardia Chemicals Ltd. –Versus- Union of India reported in (2004)4  Supreme Court Cases page 311, the Supreme Court held as follows:-

“To a very limited extent, jurisdiction of the civil court can also be invoked, where for example, the action of the secured creditor is alleged to be fraudulent or his claim may be so absurd and untenable which may not require any probe whatsoever or to say precisely to the extent the scope is permissible to bring an action in the civil court in the cases of English mortgages.”

However, practically a borrower is never allowed to file a suit on the ground of fraud holding that pleadings are not sufficient to establish fraud. In a number of cases, Supreme Court has not allowed filing of suit on the ground of fraud. 

 

Jagdish Singh -versus- Heeralal reported in (2014)1 Supreme Court Cases page 479

Sree Anandakumar mills limited -versus- Indian overseas Bank reported in (2019)14 Supreme Court Cases page 788

Electrosteel Castings Limited -versus- U.V.Asset Reconstruction Co. Ltd. reported in (2022)2 Supreme Court Cases page 573

Answer: It has been held in the case of HDFC Bank –Versus- Consumer Forum (2011)2 Bank. Journal page 320 that Sarfaesi action cannot be challenged in Consumer Forum.

Answer : A Secured Creditor can not take Sarfaesi action unless the taking of Sarfaesi action is agreed upon by Secured Creditors representing not less than sixty percent in value of outstanding amount and such action shall be binding on all the Secured Creditor. Section 13(9) of Sarfaesi Act, 2002

Answer : The Secured Creditor is entitled to file an application in Debts Recovery Tribunal or a competent Court as the case may be for recovery of the balance amount from the borrower. Section 13(10) of Sarfaesi Act, 2002

Answer : Section 19 of Sarfaesi Act, 2002 provides that if the Debts Recovery Tribunal holds that possession of the secured assets was not taken by the secured creditor in accordance with law and if the Debts Recovery Tribunal directs the secured creditor to return back the possession of the secured asset to the borrower or to any other aggrieved person, who had file the application under section 17 of the Sarfaesi Act, 2002, the borrower or any other aggrieved person shall be entitled to the payment of such compensation or costs as may be determined by the Debts Recovery Tribunal.

Answer : Section 34 of Sarfaesi Act, 2002 provides that no civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which a Debts Recovery Tribunal or the Appellate Tribunal is empowered by or under this Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.

Answer : Section 36 of Sarfaesi Act, 2002 provides no secured creditor shall be entitled to take all or any of the measures under sub-section (4) of section 13, unless his claim aim in respect of the financial asset is made within the period of limitation prescribed under the Limitation Act, 1963.

Answer: After sale of the secured assets and after liquidation of in entire claim of the secured creditor, if any surplus is left, the same should be refunded to the borrower or mortgager, as the case maybe

Answer: According to Rule 2(a) of the Security Interest (Enforcement) Rules 2002, Authorised Officer means an officer not less than a chief manager of a public sector bank or equivalent, as specified by the Board of Directors or Board of Trustees of the secured creditor or any other person or authority exercising powers of superintendence, direction and control of the business or affairs of the secured creditor, as the case may be, to exercise the rights of a secured creditor under the Act.

Answer: According to Rule 2(d) of the Security Interest (Enforcement) Rules 2002, Approved Valuer means a person registered as a valuer under Section 34AB of Wealth Tax Act, 1957 and approved by the Board of Directors or Board of Trustees of the secured creditor, as the case may be: